ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
RISKS
We are exposed to economic risk from foreign exchange rates, interest rates, credit risk, and equity prices. We use derivatives instruments to manage these risks, however, they may still impact our consolidated financial statements.
Foreign Currencies
Certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk. We monitor our foreign currency exposures daily to maximize the economic effectiveness of our foreign currency positions, including hedges. Principal currency exposures include the Euro, Japanese yen, British pound, Canadian dollar, and Australian dollar.
Interest Rate
Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. We manage the average maturity of the fixed-income portfolio to achieve economic returns that correlate to certain global fixed-income indices.
Credit
Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. We manage credit exposures relative to broad-based indices to facilitate portfolio diversification.
Equity
Securities held in our equity investments portfolio are subject to price risk.
SENSITIVITY ANALYSIS
The following table sets forth the potential loss in future earnings or fair values, including associated derivatives, resulting from hypothetical changes in relevant market rates or prices:
| --- | --- | --- | --- | --- | --- | | (In millions) | | | | | | | Risk Categories | Hypothetical Change | June 30, 2025 | June 30, 2025 | | Impact | | Foreign currency – Revenue | 10% decrease in foreign exchange rates | $ | (11,596 | ) | Earnings | | Foreign currency – Investments | 10% decrease in foreign exchange rates | | (17 | ) | Fair Value | | Interest rate | 100 basis point increase in U.S. treasury interest rates | | (1,415 | ) | Fair Value | | Credit | 100 basis point increase in credit spreads | | (436 | ) | Fair Value | | Equity | 10% decrease in equity market prices | | (1,213 | ) | Earnings |
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PART II